Equitable Life Assur. Soc. of US v. Bell, H92-153.

• Decision Date: 13 April 1993
• Docket Number: No. H92-153.,H92-153.
• Citation: 818 F. Supp. 245
• Parties: The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES v. Thomas E. BELL.
• Court: U.S. District Court — Northern District of Indiana

818 F. Supp. 245

The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES v. Thomas E. BELL.

No. H92-153.

United States District Court, N.D. Indiana, Hammond Division.

April 13, 1993.

Leonard M. Holajter, Friedrich, Bomberger, Tweedle & Blackmun, P.C., Highland, IN, for plaintiff.

Mark S. Lucas, Lucas, Holcomb & Medrea, Merrillville, IN, for defendant.

ORDER

LOZANO, District Judge.

This matter is before the Court on Cross-Motions for Summary Judgment, filed by the Plaintiff in this declaratory judgment action, the Equitable Life Assurance Society of the United States ("Equitable"), and the Defendant, Thomas E. Bell ("Bell"). For the reasons stated herein, Equitable's Motion for Summary Judgment is DENIED, and Bell's Motion for Summary Judgment is GRANTED.

BACKGROUND

The undisputed material facts of this insurance coverage dispute are as follows: On September 4, 1980, Bell applied to Equitable for a disability income policy. On October 20, 1980, Equitable issued its policy of disability income insurance No. 80709798 (the "insurance policy") to Bell with an effective date of October 14, 1980. Equitable agreed to pay benefits provided for loss resulting from injury or sickness as defined in the insurance policy. From September 4, 1980, to February 28, 1991, Bell paid all premiums due under the policy. On February 28, 1991, Bell became totally disabled from multiple sclerosis. Subsequently, on or about March 1, 1991, Bell submitted his statement of claim for disability benefits. Equitable has been making disability payments to Bell in accordance with the disability policy in the amount of $3,000 per month, and has paid to Bell all current monthly disability benefits to January 21, 1993, totaling $65,400.

Bell was first treated for multiple sclerosis in January 1978. In March 1978 Bell was advised for the first time by Dr. Floyd Davis that he suffered from multiple sclerosis. Prior to September 1, 1980, Bell had the following health problems or conditions which were related to his multiple sclerosis: Weakness, numbness, lack of dexterity in his hands, lack of depth perception, and/or hand/eye coordination, slurred speech, blurred vision, double vision, and loss of balance. Bell missed the first four months work in 1978 and ten days each in January 1979 and January 1980, while hospitalized at Rush Presbyterian St. Lukes Hospital for conditions related to multiple sclerosis.

Equitable was not aware of Bell's multiple sclerosis prior to the disability policy going into effect and did not become aware of Bell's multiple sclerosis condition until after Bell filed his claim for disability benefits on March 1, 1991. As such, Equitable contends that it has no obligation under the insurance policy to pay disability benefits, as Bell's multiple sclerosis manifested itself prior to the time the disability policy was in force, and therefore is not a covered sickness under the terms of the policy.

Bell contends that by virtue of the insurance policy's incontestability clause, which will be discussed in depth below, Equitable is obliged under the policy to continue payments for Bell's disability resulting from multiple sclerosis.

The insurance policy contains the following relevant provisions:

On page one of the policy, Equitable "agrees, subject to the exceptions and to the further provisions of this policy, to pay the benefits provided for loss resulting from injury or sickness as defined on page two."

The policy further states:

DEFINITIONS

SICKNESS. Sickness means sickness or disease of the Insured which first manifests itself while this policy is in force. TOTAL DISABILITY. Total disability means the complete inability of the Insured, because of injury or sickness, to engage in the Insured's regular occupation ...

* * * * * *

EXCEPTIONS

This policy will not cover any loss which is caused or contributed by any of the following:

1. injury occurring or sickness first manifesting itself prior to the effective date of coverage under this policy (subject to the second paragraph of the Incontestability provision on page six).

* * * * * *

GENERAL PROVISIONS

INCONTESTABILITY. (a) After this policy has been in force for a period of two years during the lifetime of the Insured (excluding any period during which the Insured is disabled), it shall become incontestable as to the statements contained in the application.

(b) No claim for loss incurred or total disability (as defined in the policy) commencing after two years from the Date of Issue of this policy shall be reduced or denied on the ground that a disease or physical condition had existed prior to the effective date of coverage under this policy, unless, effective on the date of loss, such disease or physical condition was excluded from coverage by name or specific description.

Equitable contends that it is entitled to summary judgment because Bell's multiple sclerosis condition is not a covered sickness under the policy because it first manifested itself prior to the effective date of the policy. More specifically, Equitable's contention is that because the policy defines "sickness" as sickness or disease which manifests itself while the policy is in force, that because Bell's multiple sclerosis manifested itself before the policy was in force, Equitable never agreed to insure Bell against disability arising through his multiple sclerosis.

Bell, on the other hand, contends that he is entitled to disability benefits based on paragraph (b) of the incontestability provision appearing on page six of the policy, which states that no claim for total disability commencing after two years from the date of issue of the policy shall be denied on the ground that the disease or physical condition had existed prior to the effective date of coverage. Therefore, he contends that although his multiple sclerosis was a pre-existing condition, excluded from coverage by the policy, because he was not disabled until after two years from the date of issue of the policy, Equitable cannot now deny his claim. Therefore, he contends that he is entitled to summary judgment in this declaratory judgment action.

Thus, the issue before the Court today is whether Equitable's claim of lack of coverage is barred by the incontestability clause of the policy.

DISCUSSION

Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary judgment is proper only if it is demonstrated that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); First Wis. Trust Co. v. Schroud, 916 F.2d 394, 398 (7th Cir.1990). In other words, the record must reveal that no reasonable jury could find for the nonmovant. Karazanos v. Navistar Int'l Transp. Corp., 948 F.2d 332, 335 (7th Cir. 1991); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). In deciding a motion for summary judgment, the Court must read all facts in the light most favorable to the nonmoving party. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513; Richardson v. Penfold, 839 F.2d 392, 394 (7th Cir.1988).

The burden is upon the moving party to identify those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits," if any, which it believes demonstrates an absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. at 2553. Once the moving party has met this burden, the nonmoving party may not rest upon mere allegations but "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Becker v. Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir.1990); Schroeder v. Lufthansa German Airlines, 875 F.2d 613, 620 (7th Cir.1989). "Whether a fact is material depends on the substantive law underlying a particular claim and `only disputes over facts that might effect the outcome of the suit under governing law will properly preclude the entry of summary judgment.'" Walter v. Fiorenzo, 840 F.2d 427, 434 (7th Cir.1988) (citing Anderson, 477 U.S. at 250-252, 106 S.Ct. at 2511-2512).

"A party who bears the burden of proof on a particular issue may not rest on its pleading, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact which requires trial." Beard v. Whitley County REMC, 840 F.2d 405, 410 (7th Cir. 1988). Therefore, if a party fails to establish the existence of an essential element of its case on which it bears the burden of proof at trial, summary judgment will be appropriate. In this situation, there can be "`no genuine issue as to any material fact', since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex, 477 U.S. at 324, 106 S.Ct. at 2553.

Contractual Interpretation

Essentially, this diversity case is a coverage dispute which turns on contractual interpretation. As a diversity court, this Court must apply the law which would be applicable in the forum state. Klaxon Company v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). It is undisputed that the applicable law is the law of Indiana. However, the parties and this Court have been unable to locate Indiana law which is instructive on the issue raised, and therefore, this Court must attempt to predict how the Indiana Supreme Court would resolve this issue. Williams, McCarthy, Kinley, Rudy & Picha v. Northwestern Nat'l Ins., 750 F.2d 619 (7th Cir.1984); Heinhold v. Bishop Motor Express, Inc., 660 F.Supp. 382 (N.D.Ind.1987).

As stated above, this dispute concerns the interpretation of the insurance policy. Equitable argues that Bell's disease is not within the coverage of the policy because it did not first manifest itself after the date of issue of the...